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Post by WestonKevTMP on May 17, 2017 6:41:04 GMT
Is anyone going to this tonight?
I have an invite (yes I'm still an enthusiastic lender on the platform, just perhaps at lower levels than before for a myriad of reasons) and a green card for the night out. But feeling apathetic about it, and for some reason think the old forumites aren't that bothered either, having moved on to the more racier platforms.
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Post by WestonKevTMP on May 15, 2017 18:46:23 GMT
I think they have taken into account all of the repayments (128.3) in the denominator... Actually, Lendy have used the more normal method. Defaults as a percentage of total lent (i.e. outstanding plus capital repaid). However if using this "loan amount defaulted" method you would usually then forecast what it will end up at once the remaining non-default outstanding balances have also been paid. Presuming a consistent run-rate, this would result in the current default rate of 3.6% turning into 5.7%. This ignores current arrears loans not yet defaulted, which would obviously worsen the picture. Another more typical way is to simply calculate the bad rate by the ratio of defaults to monies paid back, as an indicator of the final default rate. Think cash not repaid t o what was expected to be repaid. This give a more worrying 8.4%, again ignoring the current loans in negative days. However, in secured lending this Probability of Default, is only half the story. Everything depends on the recovery rate post default. Known as the Loss Given Default ("LGD"). In unsecured lending this LGD is ~75% depending on product, i.e. you lose most of your money post default. But for normal secured lending like mortgages this is usually sub 10% LGD. It can even be 0% losses in a rising market, unless you're called Northern Rock.... So for Lendy they to date have a 0% LGD, as they recovered cash from security, and monies from other places (back of sofa?) to repay lenders. So the Lendy LGD in the future is the missing factor, and that will all depend on the quality of security and legalities.... Kevin.
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Post by WestonKevTMP on May 6, 2017 20:08:17 GMT
Just to be clear, you are saying under 4% and Z are saying over 6%? Hmmmmm... My numbers are simply the capital + interest returned, minus default and latest / loan amount. Expressed as a percentage (minus 1). I don't know how fees come into this, or how long money was actually out for. For example 12 month loans as the balance reduces, you'd have the chance to reinvest capital repaid. If your capital repaid was reinvested you'd have got a higher return, my analysis is simply returns on the total money originally lent per month. So the Zopa numbers on your actual returned will be more accurate than mine, because it'll have includes the term of loans and how you reinvested. Also, mine deducts late capital, and obviously some of this will " cure". You should trust the Zopa returns. The analysis was intended to look at trends, to see if things are different today that historic. And get a sense if the projected lender rates will be true. Kevin.
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Post by WestonKevTMP on May 6, 2017 15:11:24 GMT
It isn't annualised, just shows the returns in percentage ( the green line) from the year the money was lent to now. So for example, overall cash lent in 2010 has returned 11.6% to now (I'd guess over a mix of terms from 12 - 60 months, so cash was probably out for an average of around 36 months - so 11.6% is a 3 year return for the 2010 vintage). More recent vintages are clearly returning less. Although it's difficult to say how 2016 or 2017 will eventually return, but it's fair to say the returns are lower than those halcyon days, or that's what the loan implies. Only loans to 2011 are fully amortised (i.e. finished, and performed confirmed) Thanks for the great analysis. So you are saying 11.6% is about 3.86% per year? That sounds about right. Although complicated because you would have been getting your capital back, and so depends how you reinvested.
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Post by WestonKevTMP on May 6, 2017 9:52:15 GMT
When I look at actual returns, my numbers make the performance look better than I expected through the credit crisis, but actually worse more recently (never negative, it should be noted, i.e. 100% of capital has always been returned); This isn't segmented by product or my estimate of risk, but simply compares the Loan Amount to the Principal Collected+Interest+Outstanding Balances (excluding late and default). Although it's unclear from the data how this return would be reduced by Zopa fees (i.e. are the numbers in the LoanBook gross or net of their fees) It isn't annualised, just shows the returns in percentage ( the green line) from the year the money was lent to now. So for example, overall cash lent in 2010 has returned 11.6% to now (I'd guess over a mix of terms from 12 - 60 months, so cash was probably out for an average of around 36 months - so 11.6% is a 3 year return for the 2010 vintage). More recent vintages are clearly returning less. Although it's difficult to say how 2016 or 2017 will eventually return, but it's fair to say the returns are lower than those halcyon days, or that's what the loan implies. Only loans to 2011 are fully amortised (i.e. finished, and performed confirmed) Kevin. P.S. Here's the data:
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Post by WestonKevTMP on May 5, 2017 20:14:52 GMT
Looking at the high level bad debt (I'll break this down later), there is a clear trend towards higher bad debt that you'd associated with the higher risk grades and APRs. I've used the fields available in the loanbook, and created the following fields; > bad debt balances that are late and default, divided by original loan amount. I've called this " bad rate", although I appreciate some of the lates will cure (but again, some goods will go bad). > forecast bad debt, which is a simple ratio of the current "bad rate" factored by the balance paid down. This is prudent, or harsh, because it assumes bad debt will constant through the life of loans (which it isn't) > Defaults on Collected £, which is effectively of the money paid back; what amount didn't come back and got defaulted. On an annualised based: 2017 data is too immature. But 2016 indicates a final bad debt rate somewhere between 4.5% and 10% depending on which methodology. I'll hazard a guess around 6-7% of loans will default, but only time will tell. If you just look at 2015 to 2017; It's clear the escalation started in 2015. Which coincides with the overall increase in volumes of loans matched, i.e. I'll hazard a guess this was done by going down the risk curve (rather than new channels of borrowers). Which is fine, as long as the loans are priced correctly, which considering the expertise they have I think they probably are. However the one lesson that is clear is that the risk appetite has increased, and as a result we can all expect much higher defaults that historically. And for those in Zopa+, this might be uncomfortable. And we are reliant on Zopa getting the pricing and specialised underwriting right on this new segment, which despite their 12 year history is an area of lending they've not done before. Kevin. P.S. Here is the raw data in the charts.
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Post by WestonKevTMP on May 5, 2017 17:51:08 GMT
However, if you analyse the portfolio by APR paid by the borrower, there has been a clear shift. The Loanbook has a field called 'Lending Rate' which I've assumed to be the APR paid by the borrower. Or at least I hope it is, because at the maximum of 31% on 5 year loans would get very scary if fees was added on top.... The following chart shows the minimum, average and maximum lending rate on Zopa 5-year loans (all lender products): In April 2017 the minimum rate was 3.1% APR (and this tallies with what you see on MoneySuperMarket), the average was 10.5% APR, but the highest has dramatically increased to 31% APR. The maximum (and obviously therefore the average) are dramatically up on early 2016 So depending on how you classify "sub-prime", many bankers would argue that Zopa have moved into sub-prime territory for some borrowers. Personally I do classify 25%+ APR on a 5-year loan s sub-prime (it's different for different terms, just for the argument). All of the rates have crept up in the last couple of months slightly, this could be a blip or as a reaction to actual loan performance (as hinted by lenders). Kevin.
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Post by WestonKevTMP on May 5, 2017 17:43:37 GMT
Comrades, There's quite a bit of discussion on another thread as to lenders returns on Zopa +. And a few too many people have had a lot of defaults since February 2017, in that there defaults have exceeded their interest, so they are actually losing money. There were not many defaults before, but that's to be expected because with the exception of fraud, it takes time before you default someone and Zopa+ was only launched in Q1 2016. The issue is these are personal stories, and random bad debt statistical noise could mean this our vociferous outliers. This is just a starter, I'll post more later. But I've downloaded the Zopa loanbook. A few weaknesses in that it doesn't say what loans are Zopa+ or Classic, so there is only so much I can do (I've made some assumptions for later), and they don't say if a bad debt is credit or fraud risk bad debt. Zopa have not changed the split of loans by Term, where longer terms are traditionally higher risk. Around 43% of Zopa loans are 5-year loans, and this is shown in the chart below: This consistency shows they haven't increased risk by shifting the mix of product term. Kevin.
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Post by WestonKevTMP on May 5, 2017 9:57:43 GMT
If that was the discussion I remember, then I believe someone even mentioned that it is a legal requirement to do it in this order Not sure if thats 100% correct, but it does make sense - since the option to repay is effectively owned by the borrower, then any repayment should be to the borrowers advantage - ie most expensive first There was either a court case or controversy that resulted in government action some years ago where credit card companies became compelled to use repayments against the highest interest portion of any debt (e.g. default interest), I think this may have been extended to banks, but I am unsure whether P2P platforms, as part of consumer credit legislation, are covered by these rules The rules on payment allocation were specifically for credit and store cards; www.google.co.uk/url?sa=t&source=web&rct=j&url=http://www.theukcardsassociation.org.uk/wm_documents/credit_and_store_cards_review_-_the_uk_cards_association.pdf&ved=0ahUKEwjAoLicvdjTAhWhA5oKHT2rCaQQFghMMAQ&usg=AFQjCNExtDZTR0E6KGUgsI8I_l1P9Q-SrA&sig2=jwCFwvl4AlPsruJEwpC-TQIt didn't cover loans, probably because the concept of a loan being made up of different APRs merged into a single APR didn't exist. And in a way it still doesn't today, as the borrower pays a single rate. I also think it's right that RateSetter benefits from any early repayment. Firstly because early repayment expectations is baked into the profitability of the loan and hence their ability to offer loans at the rates they do (and lenders the high rates achieved), secondly if a lender has match a loan at an AER they are happy with then what's changed.... Kevin.
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Post by WestonKevTMP on May 3, 2017 16:31:07 GMT
Technically, all of these can be split into those that never had any intention of paying, and fraud impersonation. This presumes someone who had intention could have made at least the first payment from the remains of the loan cash!
There is a difference, because intention by the real borrower is very difficult to ascertain, especially in the higher risk Z+ markets where borrowers will either have a limited history of credit by young/transient/thin credit file customers, or have impaired previous credit. It's in the risk of this lending, especially automated lending with neither manual underwriting nor conversation to ascertain intent.
No payment by fraud impersonation is altogether different. And if many of these loans are fraud, then that is an issue that Zopa should deal with. The impersonation frauds at RateSetter were negligible statistically. I still remember most of their damn names.... And we've had none at The Money Platform.
But we will never know with Zopa's first payment defaults which is which, as they don't report the difference. Not even in the loanbook download. Which is a shame, because in Z+ I would put any fraud losses at the door of Zopa, and lenders should be protected from fraud losses across all lending products. In my opinion.
Kevin.
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Post by WestonKevTMP on May 3, 2017 6:04:17 GMT
I spoke about concerns with the provision fund years back, ... I got very short shrift here Erm.... so here we are a few years later and lenders have continued to get every penny of capital and interest expected. And complete liquidity as promised? I know things aren't perfect (for example I'm no longer there and the PF is split between cash and contracted), but it's been nearly 6 years now. In my opinion, that deserves some trust. But back to the point, it probably is not a good idea to put your house deposit into P2P, which should always be part of a wider investment strategy including cash, equities and any other alternatives that take your fancy (I like wind turbines, and "roller coaster rides" !) Kevin.
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Post by WestonKevTMP on Apr 30, 2017 15:23:53 GMT
This is true, and might not seem fair. But The Money Platform have to pay the same credit reference fees, other applications charges, same payment processing costs, etc for all loans - and all declines. And we only get paid if the customer pays back. Also base costs like IT, office and staff are the same as well.
So it is more equitable than it might at first appear, if you dig into the financials.
An alternative would be to change the fee structure so that it's a share of what comes back. But the percentage split in place now would need to change to have any hope of platform profitability. And without profitability, no-one gets paid!
Kevin.
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Post by WestonKevTMP on Apr 29, 2017 13:02:02 GMT
There are few bugs better guaranteed to sip me off than automated address fillers which don't work. This one offers you your address in a menu, and then says it's invalid. No option to enter the address yourself. No option to tick a bow confirming the address is actually correct. carp. Could you DM or email me the address you tried, so we can test it? We are having some issues with some addresses that only have names, no numbers. Alas this is quite often, but we are going to get it fixed if people tell us.... Kevin.
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Post by WestonKevTMP on Apr 29, 2017 11:02:39 GMT
true enough but TMP is a very young platform, they seem to me to have a good idea and a good attitude towards investors. The slow pace of loans has tried my patience but I am still in a place to work with them. Aside from that I hope I am on their Christmas Card list We'd rather buy our lenders a coffee or beer, if they're SE based (London/Kent....)...
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Post by WestonKevTMP on Apr 29, 2017 11:01:28 GMT
Another repayment - £500, 4 week, 0.4%. It was scheduled to pay on 9th May, but actually paid early on 28th April, £522.10 returned. The nature of short term loans is that those that intend to repay, often do at the earliest opportunity to reduce cost. Its in the nature of the product/market, and not unique to The Money Platform.
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